RFJ to expand one-price selling

RFJ Auto Partners Inc. will begin to expand its Hassle Free Buying strategy, a form of one-price selling, to all of its dealerships starting this year.

The group operates nine of its 25 stores under the pricing model. It will complete a road map this quarter for implementing the model across all its stores over the next three years, Rick Ford, RFJ’s CEO, told Automotive News.

“It’s a big focus for us in 2017,” Ford said. “We’ll start rolling it out one store at a time.”

RFJ will “work out the bugs and tweak” the process as necessary, Ford said. A transition team of four to six people at each dealership will lead the launch.

The cost to switch to Hassle Free Buying is in the “seven figure” range, he said. But the stores using it have higher customer service scores, higher sales volume and lower employee turnover than RFJ’s other dealerships, he said. Still, Ford is prepared to lose some employees during the changeover, especially in the sales department as it tweaks the pay plan.

“The turnover cost and the changeover cost will be high, but the benefits far outweigh the cost to do it,” said Ford.

‘It’s a powerhouse’

RFJ, in Plano, Texas, formed in February 2014 with the backing of Jordan Co., a New York private equity firm. About a year later, it bought two Dave Smith stores, in Kellogg, Idaho. Ford said the Dave Smith stores would be instrumental in helping RFJ replicate the one-price model at its other dealerships.

When it was bought by RFJ, Dave Smith Auto Group ranked No. 111 on Automotive News’ list of the top 150 dealership groups in the U.S., with retail sales of 9,298 new vehicles in 2014 from just two stores.

Ford: “One store at a time”

Dave Smith Chrysler-Dodge-Jeep-Ram sold more than 7,000 new vehicles last year, making it the largest Chrysler-Dodge-Jeep-Ram dealership in the U.S. for new-vehicle retail sales, Ford said.

The Chevrolet-Cadillac-Buick-GMC store sold 4,000 to 5,000 new cars in 2016, he said.

The stores have prospered under Hassle Free Buying, a term RFJ has trademarked. “It’s a powerhouse,” Ford said. “We sell cars in Alaska, Hawaii and all the lower 48 and it’s because of the ease with which customers can do business with Dave Smith stores and get a fair price.”

He said the dealerships also stock ample inventory, which helps to close deals.

Since acquiring the Kellogg, Idaho, stores, RFJ bought two other dealerships in the Northwest, renaming them Dave Smith Nissan in Spokane, Wash., and Dave Smith Alfa Romeo in Coeur D’Alene, Idaho.

RFJ ranks No. 49 on Automotive News‘ top 150 dealerships list, with 19,135 new-vehicle retail sales in 2015. This year, Ford expects revenue to be about $2.55 billion, including about $700 million in fleet sales. RFJ will retail about 50,000 new and used vehicles, with an additional 27,000 fleet sales this year, he said.

Replicate?

RFJ also uses the one-price model at Jordan Ford and Jordan Toyota in South Bend, Ind., which RFJ bought in August, and the Vernon Auto Group in Vernon, Texas, where three dealerships sell Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Jeep and Ram vehicles.

Last year, Ford said, he hired consultant Glenn Mercer to study Hassle Free Buying at eight of the stores to determine: “What do they do that’s the same as our traditional-model stores? What do they do that is different? Can we replicate it at our other stores?”

Mercer spent 12 days in each of those dealerships and then many months analyzing his findings and the process.

He concluded Hassle Free Buying can be replicated at the other stores, Ford said.

The model is Internet-based and uses a salesperson, a finance manager and delivery specialists. There is no negotiation on the trade-in vehicle price, either. The stores operate on a commission-based pay plan, based on sales volume rather than the traditional gross margin. That’s because RFJ sets the no-dicker prices, Ford said.

“The employee’s whole job is to take care of the customer,” Ford said.

On average, a salesperson at one of RFJ’s Hassle Free Buying stores sells 24 vehicles a month and works 40 to 45 hours a week. At RFJ’s traditional-model stores a salesperson sells an average of eight to 10 vehicles a month and works 55 hours a week, he said.

Win-win

Ford said by removing negotiation from vehicle transactions, RFJ will be able to hire top talent for sales and managerial jobs. “I can hire managers from outside the auto industry because I will need people managers and not deal managers,” Ford said.

The model will improve employee tenure, too, he said. The average turnover rate in sales jobs at a Hassle Free Buying store is 40 to 50 percent lower than at RFJ’s traditional stores, he said.

Hassle Free Buying also draws a high-quality customer, he said. The average customer’s credit score across the stores is 740, a score most lenders consider good enough to merit the best interest rates, he said.

“The next generation likes to buy things the way they buy things on Amazon.com or Zappos,” Ford said. “They don’t necessarily want the lowest price; they want a fair price.”

Why go Hassle Free

RFJ Auto Partners sees these advantages from spreading its Hassle Free Buying model, a form of one-price selling, to all 25 of its dealerships. The model is used in its high-volume Dave Smith dealerships.